Markets swung midweek but showed resilience in other asset classes. Is it cause for alarm or a sign of opportunity ahead?
Monday S&P 500 0.28%| NASDAQ 0.40%
Markets started the week off coming close to their all-time highs with the Dow Jones doing just that. The strong start was boosted on the back of earnings reports from Goldman Sachs, which did a lot of heavy lifting for the Dow Index.
Tuesday S&P 500 0.64% | NASDAQ 0.20%
Blue chip companies, including notable bank stocks, and small cap companies were resilient throughout the trading day. Year-to-date, growth companies have beaten value companies at a ratio of almost 2:1 but a recent pivot away from growth suggests a rotation is occurring on the back of strong revenue from value-oriented companies.
Wednesday S&P 500 -1.39% | NASDAQ -2.77%
The S&P 500 and Nasdaq tumbled as the rotation from growth began to eat away at the indexes. Tech stocks took a turn lower as chip manufacturers were under pressure by the possibility of export channels being restricted due to geopolitical concerns. The NASDAQ took the brunt of the selloff.
Thursday S&P 500 -.78% | NASDAQ -.70%
Weekly continuing and initial jobless claims both rose, which will be an area of focus for the Federal Reserve in future meetings. Chairman Powell stated earlier in the week that they will be looking closely at the labor market and will consider cutting rates even if inflation is not at their 2% target. The Dow Jones reversed course and major markets continued their slide to close out the day.
Friday S&P 500 -.71% | NASDAQ -.81%
While a lot of focus for the month of July has been on the Large Cap Indexes, attention has shifted to the Russell 2000 which represents small cap companies. The index is up almost 11% over the past month, indicating a small cap value play for portfolios. Small cap companies would benefit in a declining interest rate environment.
Conclusion S&P 500 -1.96% | NASDAQ -3.68%
The week brought some resistance as the tech heavy and growth indexes saw values plummet midweek. A selloff in growth suggests there may be overvaluations and the trades for the week reflected as much. Additionally, the volatility index (VIX) reached a high of 17 which was last seen in the April 2024 selloff. Although not in alarm territory (typically seen when exceeding 20), the VIX was representative of a higher volume trading week. Corporate earnings season is upon us which will give guidance of economic strength and GDP projections. GDP for the 2nd quarter will be released in the next week, lending a hand towards the economic outlook for 3rd quarter.
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Always remember that while this is a week in review, this does not trigger or relate to trading activity on your account with Financial Future Services. Broad diversification across several asset classes with a long-term holding strategy is the best strategy in any market environment.
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